Vanguard closes Wellington Fund to many new accounts

February 28, 2013|Reuters

(Reuters) - Vanguard Group said on Thursday it would stop opening new accounts from financial advisers and institutional customers in its popular $68 billion Wellington Fund, which invests in a mix of stocks and bonds.

All current investors can continue to add money to the fund and retail investors will be permitted to open new accounts, Vanguard said.

The same limits, effective immediately, will also apply to the $39 billion Vanguard Intermediate-Term Tax-Exempt Fund, the firm, based in Valley Forge, Pennsylvania, said.

"Our commitment is to protect the interests of the funds' current shareholders, and as we've done in the past, we are demonstrating the conviction to do this by partially closing two of our largest funds," Vanguard Chief Executive Bill McNabb said in a statement.

Started in 1929, the Wellington Fund is Vanguard's oldest and best-known fund. The fund's investor class shares have gained an average of 9.08 percent per year over the past 10 years through February 27, better than 96 percent of similar funds according to data from Lipper, a unit of Thomson Reuters.

Customers have poured into the fund in January and February, amid an industry-wide boom for both equity and bond funds, likely prompting the partial closure, according to long-time analyst Dan Wiener.

"While I don't think the managers necessarily will have trouble with the size of the fund I do think that they may have trouble with putting the money to work that fast," said Wiener, chief executive of Adviser Investments and editor of the Independent Adviser for Vanguard Investors newsletter.

The intermediate muni bond fund has posted top returns over the past five years, according to Lipper. The fund's investor class shares gained an average of 5.83 percent a year, better than 92 percent of similar funds.

Separately, Vanguard said it plans to open a new mutual fund and accompanying exchange-traded fund by the end of the second quarter that will track an emerging market bond index, the Barclays USD Emerging Markets Government RIC Capped Index.

Vanguard, with $2.1 trillion of assets under management, is the largest U.S. mutual fund company and the third-largest U.S. ETF manager.